While Clarksville, Tennessee is a family-oriented town, divorces do happen. As a state, Tennessee ranks tenth in the nation with the highest rates of divorce. Often couples getting divorced later in life have much more to worry about than younger couples. After all, older couples have already established themselves, they have steady jobs and careers, and many times their assets are jointly owned. A divorce can often disrupt these well-laid plans and jointly held assets.
To emphasize this point, consider the following story: I recently had a client that came to see me for help with probating his late father’s estate. His mother and father had divorced over 20 years ago, but the father never took his ex-wife off as a beneficiary of his retirement account. As a result, the ex-wife attempted to claim this policy at father’s death even though the beneficiary of the father’s will was my client. This type of situation creates a significant mess as far as adjudicating the former wife’s claims versus those of the son.
Here is the point: If you are older and going through a divorce take some time to update and reconsider your estate plan. Here’s an overview of what that procedure should include.
What to Do with an Estate Plan after a Divorce in Tennessee?
After a divorce, things change; obligations change; assets change. If you had an estate plan prior to the divorce, you want to make sure it is consistent with all the changes in your life. Here’s a short list of things you may need to do.
Divorce Agreement. You should provide your divorce agreement to your estate planning attorney. Your attorney will need to assess what obligations you have to your ex-spouse, particularly in the event of you die before your ex does. For example, if you have provided that your ex-spouse is to receive part of your IRA or 401(k), this should be taken into consideration in forming your plan. Similarly, if you are providing alimony to a former spouse, those payments need to be addressed by your plan as well.
Wills and Trusts. Update your will and trust. Updating wills and trusts is key to making sure your ex-spouse cannot control any of your assets or your estate upon your death. If you do not have a will or trust, now is the time to create one. Wills and trusts serve different functions and benefit you and your beneficiaries in different ways. A will is important so that you can establish things like a testamentary guardian for a minor child. If something happens to you and your ex-spouse, you can recommend who should take custody of your child. Similarly, creating a trust for your kids prevents your ex-spouse from having any control over the money. You have the ultimate decision power as to how your assets will be used and who will be in charge of them.
Beneficiary Designations. Beneficiary designations are important. You need to make sure your estate plan sets our beneficiaries according to your wishes. Where changes are necessary due to the divorce, you need to make sure those changes are made. Consider the example at the outset of this article. If you forget to take your ex-spouse off your accounts as a beneficiary, your ex or your ex-spouse’s heirs could benefit from your estate plan upon your untimely death. Remember: It’s good practice to review your beneficiary designations every few years.
Healthcare Power of Attorney. If you have a health care power of attorney, update it in the event you had listed your spouse as the agent. If you don’t have a health care proxy, there is no time better time than to appoint someone to manage your medical decisions.
General Durable Power of Attorney. If you have a general durable power of attorney, you also want to remove and replace your ex-spouse in the event you had named them as the person responsible for making decisions for you.
Life Insurance. Depending on your divorce decree, you may be obligated to keep an ex-spouse as a beneficiary of your life insurance. Speaking with an attorney can help make sure you do not fail to update or commit to something that could lead to litigation upon your death.
Small Business. Clarksville is home to many small businesses – it’s what makes our community thrive. If you have a small business, you want to make sure your succession plan or buy-sell agreement reflects your divorce decree. Many times, a married couple plans for a spouse to take over a business, but you may no longer want this to happen in the event of a divorce.
The Key Takeaway
Whether you and your ex remain friends is not the issue when it comes to your estate plan after a divorce. Your priorities may have changed. Your assets may have changed. Your obligations may have changed. Accordingly, your estate plan should reflect these changes. Once the estate plan is updated and reflects your new life and intentions, you’ll want to make sure you continue to maintain it throughout the duration of your life.